DHFL net loss zooms in March qr on higher provisioning of Rs 3,280 cr

Results are unaudited, to publish audited numbers by July 22

After months of delay, Dewan Housing Finance Corporation (DHFL) on Saturday released its standalone unaudited results for the March 2019 quarter in which the crisis-hit firm reported a net loss of Rs 2,223 crore on account of the additional provisioning of Rs 3,280 crore. In the same quarter in FY18, the housing finance firm had reported a net profit of Rs 134 crore.

For the whole of FY19, the company has posted a net loss of Rs 1,036 crore, as against a profit of Rs 1,240 crore in the previous year. 

The company has, however, posted 22.9 per cent growth in total income in Q4FY19. Total income in the March quarter stood at Rs 3,057 crore, and for the entire financial year, it was Rs 12,901 crore. The assets under management (AUM) of the company grew 8 per cent to Rs 1.19 trillion in Q4FY19. The AUM was Rs 1.11 trillion in the year-ago quarter.

“In the backdrop of a significant slowdown in disbursements and loan growth post-September 2018, the financials of the company have been quite strained for the quarter, impacting the overall performance of the year,” said Kapil Wadhawan, chairman and MD of DHFL.

Operating profit was Rs 372 crore for the quarter and Rs 2,378 crore for the whole year. Gross non-performing assets (NPAs) for Q4FY19 stood at 2.74 per cent, as against 0.96 per cent in Q4FY18.

In a filing to the stock exchanges, the company said the audit committee had asked the management to place its annual audited consolidated financial results for Q4FY 19 and the whole of FY19, along with the joint statutory auditors’ report, on or before July 22. Sources said the statutory auditors could clear the results after the auditors had done so. 

The National Housing Bank, the supervisory body for housing finance companies, has made certain observations on DHFL’s loans after inspection. Consequently, this brings down DHFL’s capital adequacy to 10.24 per cent. The NHB has provided 21 days to DHFL to comment on these observations, though the company doesn’t concur with the observations made.

Wadhawan said, “The company is in an advanced stage of submitting its resolution process under the inter-creditor agreement (ICA) as entered into by banks. As already announced, the ICA will examine and firm up the terms of the resolution process by July 25, 2019 and make it operational before September 25, 2019.”

DHFL has said the company is nearing completion in identifying a strategic investor, which will bring in equity to boost its capital base. “The board will be reconvening in the next two weeks to look through the potential proposals and will decide accordingly on the way forward,” Wadhawan said.

The joint lenders’ forum has also taken into account the need for recommencing business by DHFL and disbursing new home loans. Banks would enable the infusion of necessary liquidity into the system. It is expected that DHFL will be able to restart its business next month and scale it up in the months ahead, the firm said.

The company's ability to raise funds has been substantially impaired and the business has been brought to a standstill with there being virtually no disbursements. These developments may raise a significant doubt on the ability of the company to continue as a going concern, said the company.

Last month, DHFL defaulted on its interest obligation for its non-convertible debenture (NCDs) worth Rs 962 crore. However, the company paid off its obligations within the seven-day cure period. Following the defaults in interest payment on NCDs, rating agencies downgraded DHFL’s commercial paper to default grade.

DHFL’s management has maintained that it was committed to meeting all future debt servicing obligations in a timely manner, through further asset monetisation plans as well as on-boarding of a strategic partner for its business. 

“For the last nine months, with single-minded focus, we have met all our financial obligations and are looking to return to business normalcy at the earliest. Since September 2018, DHFL has managed to make repayments of over Rs 41,800 crore primarily through securitisation of assets and repayment collections”, Wadhawan said. DHFL has sold its strategic retail assets including Aadhar, Avanse and DHFL Pramerica Asset Managers.

Things started going downhill for the mortgage lender when Infrastructure Leasing & Financial Services (IL&FS) back in September 2018 defaulted on its debt obligations because of huge asset liability mismatch and fears crept in the minds of investors that housing finance companies like DHFL and IndiaBulls Housing Finance might also default on their debt obligations.